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Debt-laden Kingfisher Airlines is set to lose its licence to fly after it failed to convince regulators about how it plans to fund operations under a proposal to get it flying again, a senior government source said.

Kingfisher's licence is due to expire on December 31, and a request to extend that will not be granted unless the suspended carrier can come up with a revival plan. This will effectively remove one scheduled carrier from Indian skies, at least for now.

Kingfisher has two years from now to get its license renewed , but it has to convince banks, airports, tax authorities and its staff about its viability , the source, who has direct knowledge of the matter, said.

Kingfisher, which has not flown since October, owes money to all of them.

The airline submitted a revival plan to the Directorate General of Civil Aviation (DGCA) last week, but that did not provide details of how it will fund operations, aviation minister Ajit Singh said on Wednesday.

Last month, Diageo Plc bought a majority stake in United Spirits, also a UB Group company, for $2.1 billion. UB did not specify if part of that money would be injected into Kingfisher.

The airline, owned by liquor tycoon Vijay Mallya, has been trying unsuccessfully to raise fresh cash for more than a year, and is hoping to tap Abu-Dhabi's Etihad Airways as an investor.

Kingfisher officials have not sought an appointment with DGCA yet, the source said.

The airline's shares fell as much as 4.3 percent in early trade, but were trading 0.6 percent lower at 2:29 p.m.


Copyright Thomson Reuters 2012

Story first published on: December 31, 2012 08:36 (IST)

Tags: Kingfisher, Vijay Mallya, Etihad, Ajit Singh, Jet Airways

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